Napster for Loans?

Last week, Lending Club disclosed with impeccable timing it raised $10.26 million in Series A venture capital funding, a hefty sum considering the company launched at the end of May through a small application on Facebook (I became the13,928th user this week). The company is one of a small handful of Web sites catering to people who may be having a hard time getting small loans through traditional means.

A rival site, Prosper, which raised $20 million in venture capital in July, originally set no floor for who could make a request for loans up to $25,000. The site later changed the minimum credit score for borrowers to 520, eliminating 45% of its loan listings, but still low enough to attract higher-risk borrowers in the sub-prime range.

These two sites will have a competitor soon in the U.S. in Zopa, the first to bring peer-to-peer lending online in the U.K. Zopa, which is launching here later this year, reduces lenders' risk by automatically spreading their money across many borrowers. It doesn't specify its credit score limit, but does background checks and emphasizes borrowers must have a good track record of repaying debt.

Jeff Crowe, general partner at Lending Club investor Norwest Venture Partners, said his current portfolio on Lending Club is yielding over 13%, "better than money-market funds." I'm guessing he's hoping for an even better return on his Lending Club investment. End of Story

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